NEW YORK - New York Attorney General Andrew Cuomo announced an agreement with Wall Street's three major credit-rating agencies yesterday that would overhaul how they evaluate investments backed by risky mortgage debt.

Cuomo, flanked at a news conference in New York by executives from Moody's Investors Service, Fitch Ratings Inc., and Standard & Poor's, said the new guidelines would have "a dramatic effect on the industry." An investigation was launched in February to determine how mortgage-backed securities - home loans that are pooled together and sold as investments - carried high ratings yet still collapsed during the subprime crisis.

The agreement applies only to riskier, nonprime loans in the United States and is designed to end what the industry calls "ratings shopping," which pits credit-rating agencies against one another. The $5 billion rating-agency industry has been accused of issuing favorable ratings to secure business with leading Wall Street investment banks.

Investment banks looking to issue mortgage-backed bonds previously went to all three agencies for a review, but banks would only use, and pay for, the most optimistic rating. The agencies will now get paid up-front, regardless of whether they are hired to assign a rating, a move expected to avoid any conflict of interest.

"The economic benefit for the ratings agency was to see the transaction close," Cuomo said. "If the investment bank didn't like where the process was going, they would just go to another rating agency. The rating agencies will now undertake new standards."

Cuomo's office worked on the changes alongside the Securities and Exchange Commission. The regulator will vote on its own set of rules Wednesday.